Skipton is the latest lender to confirm that it will continue lending to so-called portfolio landlords after new Bank of England rules kick in on September 30.
The Bank - through its Prudential Regulation Authority - is applying these new rules to portfolio landlords who have four or more investment properties; they also apply to landlords with three current units and who want a mortgage on a fourth.
The changes have a laudable aim: to ensure borrowers are not over-exposed if economic conditions deteriorate. They build on ‘stress tests’ recently introduced by lenders who now demand rental income to meet at least 125 per cent of mortgage costs, and who check that borrowers can still repay the loan regularly even if interest rates soar to 5.5 per cent.
Portfolio landlords have been targeted because the PRA has found that arrears rates increase as portfolio size increases. The consequence is likely to be the same for this category of investor as the 2015 Mortgage Market Review was for owner-occupiers - mortgages will become tougher to secure for those who are ill-prepared.
For portfolio buy to let lending, Skipton has revised its affordability requirements to 150 per cent at 5.5 per cent against its standard affordability of 145 per cent at 5.5 per cent.
Landlords in the portfolio category will require a minimum income of at least £45,000 but income from rental properties can be included with supporting evidence.
A large swathe of existing criteria will remain the same, says the Skipton; this includes no change to landlords having up to 10 properties in total, and no change to having up to five properties mortgaged with Skipton.
“Skipton has been active in the buy to let market for many years and we recognise the amount of changes landlords have had to manage; from changes to income tax, stamp duty, affordability, underwriting, not to mention the new EPC changes for landlords from spring next year” says a spokesman for Skipton.